Saudi Arabia is to transfer ownership of Riyadh’s floundering King Abdullah Financial District to the Public Investment Fund (PIF) from the Public Pension Agency (PPA), according to four sources aware of the matter, a Reuters report says.
The move is an attempt to rescue the project, started a decade ago with the aim of making the Saudi capital a global financial centre, and is another example of the burgeoning power of the PIF, which the Gulf state wants to make the world’s largest sovereign wealth fund.
A new approach to the project was outlined in the Vision 2030 package of economic reforms which called for transforming the district into “a special zone that has competitive regulations and procedures, with visa exemptions”.
It called for a direct link to the international airport, which would get around the kingdom’s restrictive entry policies for foreigners, and increasing the real estate and hospitality facilities in the zone to create an “integrated and attractive living and working environment”.
The PIF has chosen JPMorgan as its advisor on the transfer and a feasibility study is currently being undertaken, according to two of the sources, which among other things will establish a valuation of the district and how much compensation will be paid to the PPA.
Construction of the King Abdullah Financial District began in 2006, with skyscrapers set to house banks and the financial regulator across a 1.6 million sq m planned area – roughly four times the size of London’s Canary Wharf.
But the district, situated in the northern part of Riyadh, has been beset by problems, most recently involving the project’s master developer, Saudi Binladin Group, with construction delays and workers protesting at the KAFD site over months of unpaid wages.
It has also so far struggled to find commercial tenants.
Vision 2030 criticised the KAFD as having been conceived “without consideration of its economic feasibility” and without making the necessary efforts to convince the financial community to invest. Total investment into the KAFD had reached 31 billion riyals ($8.27 billion) by May 2014.
